FCA has fined JPMorgan Chase Bank N.A. (JPMorgan) £137,610,000 for breaches of four of its Principles for Businesses in relation to the trades carried out by its Chief Investment Office (CIO), known as the "London Whale" trades. In July 2012 JPMorgan announced $5.8 billion trading losses within the Synthetic Credit Portfolio (SCP) within the CIO, which later rose to $6.2 billion. FCA found the losses were caused by:
- a high-risk trading strategy;
- weak management of the trading;
- an inadequate response to important information that should have warned JPMorgan of the risks; and
- flaws in the marking and valuation control process for the SCP.
FCA also found failure to be open and co-operative with the regulator over a six-month period. As a result, it found breaches of Principle 2 (due skill, care and diligence), 3 (organisation and control of affairs responsibly and effectively with adequate risk management systems), 5 (proper standards of market conduct) and 11 (openness and co-operation with regulators). FCA found failings from the SCP traders through to firm senior management. It noted the firm's procedures failed to involve the compliance department at key times, and that the Principle 11 breach was aggravated by the fact that the firm was subject to a heightened supervisory relationship at the time.
The FCA fine would have been £196,586,000 had JPMorgan not benefitted from a 30% early settlement discount. The investigation also involved six US authorities. Three of these imposed total fines of $700 million. (Source: FCA Fines JPMorgan For London Whale Failings)